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What causes economic bubbles? - Prateek Singh

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During the 1600’s, the exotic tulip became a nationwide sensation; some single bulbs even sold for ten times the yearly salary of a skilled craftsman. Suddenly, though, the demand completely plummeted, leaving the tulip market in a depression. What happened? Prateek Singh explains the peak of a business cycle, commonly referred to as a mania.

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Meet The Creators

  • Educator Prateek Singh
  • Director Simon Ampel
  • Script Editor Charly Simpson
  • Narrator Addison Anderson

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Additional Resources for you to Explore
Bubble bursting, crashes, manias and depressions sound extreme don't they? In the world of economics these words take on a whole set of new meanings! Want to gain some more understanding of these terms? Visit Investopedia’s “What are Crashes and Bubbles,” then scroll down for more insight into “The Tulip and Bulb Craze,” and “The South Sea Bubble!

Find Tulip Mania fascinating? Read: TULIPMANIA: How A Country Went Totally Nuts for Flower Bulbs by Anne Goldgar. Follow along with the graphics included and learn even more! Frontline has some information about several other “bubbles” and more specifics about Tulipmania that includes a list of objects people were willing to trade for one Viceroy Tulip root. Wow, that is one flower with some power.

Mania’s and depressions are really peculiar extremities of an economic cycle, it must be noted that they are usually just a passing phase. Khan academy does an amazing job explaining the entire business cycle. Watch, take notes and learn! A depression is the opposite of mania in a business cycle! Interested in depressions? Learn more by watching John Green’s Crash Course: The Great Depression. It does an amazing job explain what happens in a depression,

It should be noted that stocks are not meant for gambling and a ‘bubble’ burst can be protected against by diversification and cutting losses. Some major misconceptions surrounding stocks are running rampant around the world. Check out this video called ‘Breaking Misconceptions ‘ on Trade Academy. It talks about the misconceptions people have about stocks and gives a quick review of the entire economic cycle. Were any of your misconceptions corrected? Take a quick look around Trade Academy and see if you are interested in any of the free courses offered.

For more on finances and warning signs that a bubble is about to burst, check out this TED Talk: How can we predict the next financial crisis? Didier Sornette.

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About TED-Ed Animations

TED-Ed Animation lessons feature the words and ideas of educators brought to life by professional animators. Are you an educator or animator interested in creating a TED-Ed Animation? Nominate yourself here »

Meet The Creators

  • Educator Prateek Singh
  • Director Simon Ampel
  • Script Editor Charly Simpson
  • Narrator Addison Anderson

Share

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